Monthly Archives: December 2016

2016 Top Ten Workers’ Compensation Fraud Cases

Number Value
Non-Employee Fraud Cases 10 $ 412,000,000
Employee Fraud Cases 0 $ 0
Total $ 412,000,000

Four of the top ten cases in 2016 are from perennial offender California, three from Florida, one each from Massachusetts and Texas, and one involving 20 different states. The misclassification of employees by employers continues to create dramatic financial fraud, with resulting cost shifting, lost tax revenues and hardship to inured employees. As we noted last year, while the “gig economy” pioneered by technology companies has lead to debate about new classifications for workers, these companies remain subject to our laws. We are starting to see widespread litigation and settlements like Uber’s $100 million payment to disgruntled drivers in California and Massachusetts. We’ll keep tracking these new developments in the context of the misclassification and fraud actions that we’ve been tracking for many years.

1. (National) FedEx to Settle Driver Lawsuits in 20 States for $240 Million (6/16/16)

FedEx to Settle Driver Lawsuits in 20 States for $240

FedEx Ground Systems, Inc. has agreed to pay $240 million to resolve claims by 12,000 FedEx drivers in 20 states. FedEx was labeling the drivers as independent contractors to avoid paying additional taxes, fringe benefits, health care costs, workers’ compensation insurance, and much more. The drivers were also not paid overtime or reimbursed for expenses.

 

2. (California) Seven People Charged in $98 Million Workers’ Compensation Fraud Case (6/7/16)

Seven in Riverside County charged with $98M medical fraud

(Left): Payman Heidary Top row: Touba Pakdel Nabati, Jason Yang, Cary Abramowitz Bottom row: Quynam Nguyen, Ana Solis, Gladys Ross (Photo: Riverside County Sheriff’s Department)

Seven people have been indicted with 107 felonies in a business scheme designed to commit workers’ compensation fraud. The ringleader, Peyman Heidary, owned or ran numerous businesses, including law firms and health clinics, and used other people to disguise his involvement and create an illegal ownership structure. The clinics were found to have inflated billings to insurance companies by exaggerating patient injuries and treatments. The businesses fraudulently billed more than $98 million to 18 insurance companies, resulting in the businesses receiving over $12.4 million in payments.

 

3. (Texas) Labor Department “Mole” Helps Business Maintain $30 Million Workers’ Compensation Scam (6/28/16)

Tshombe Anderson

Tshombe Anderson

Lydia Taylor worked at the U.S. Department of Labor in Dallas and used her position to give her family members information about federal workers’ compensation claims and warn them when suspicions arose about their fraudulent billing. Taylor’s uncle, Tshombe Anderson, was the ringleader of the group. Anderson and others formed several businesses that fraudulently billed the federal workers’ compensation program $30 million for unneeded and unrequested medical equipment for rehabilitation patients.

 

 

4. (Florida) Fake Construction Company used to Process over $17.4 Million of Fraudulent Payroll (3/28/16)
Orquidea Quezada set up Orquicely Construction LLC and used the company to process payroll for subcontractors who employed hundreds of people. In exchange for her services, Quezada kept a five percent fee. The scheme allowed the contractors to avoid paying payroll taxes, workers’ compensation insurance, and to conceal the employment of undocumented workers.

 

5. (Florida) Fake Construction Company Used to Cash $7.4 Million in Undocumented Worker Payroll (7/7/16)

Yamil Sanjurjo Cordero and Sandro Mendoza Alvarado

Yamil Sanjurjo Cordero, 33, and Sandro Mendoza Alvarado, 35. (Sun Sentinel / Broward Sheriff’s Office Handout)

Two men set up a shell company, Sunrise All Contractor Corp., to receive payments and cash checks for a fee on behalf of other companies that would then pay their undocumented workers. The scheme enabled employers to avoid workers’ compensation premiums and payroll taxes. These schemes are popular among employers of undocumented employees because these employees are less likely to blow the whistle on the fraud out of fear of exposing their undocumented status.

 

 

6. (California) Insurance Company Agent Misappropriated $7.3 Million and Unable to Pay Workers’ Compensation Claims for California Indian Tribe (8/19/16)
The operator of Management Resources Group California LLC, Gregory J. Chmielewski used more than $7.3 million from the company’s reserve accounts for his own personal investments. The company managed another company, Independent Management Resources, which sold workers’ compensation insurance to California Indian tribes. Chmielewski’s actions resulted in the company being unable to cover 117 claims.

 

7. (California) Contractor Cheated Workers’ Compensation Insurer Out of More Than $5.4 million in Premiums(10/5/16)
State of California Department of InsuranceMichael Harold Kreger, the owner of Michael Kreger Contracting was sentenced to 9 months in jail, 5 years of probation, 1500 hours of community service, and ordered to pay restitution of more than $5.4 million for underreporting his payroll and committing insurance fraud. Mr. Kreger cheated his company’s workers’ compensation insurer out of more than $5.4 million and his employees out of adequate protection for potential workplace injuries.

 

8. (Massachusetts) Construction Companies Ordered to Pay $2.6 Million for Fraud in Misclassifying Workers (8/2/16)
AB ConstructionForce Corporation, AB Construction Group, and employers Juliano Fernandes and Anderson Dos Santos were found by the U.S. Department of Labor to have misclassified the bulk of their employees to avoid paying overtime wages, workers compensation insurance, payroll taxes, and more. A consent judgment was entered requiring the companies and employers to pay more than $2.6 million in damages and penalties for their fraud.

9. (California) Company Underreporting Payroll Defrauds Insurer of $2.1 Million (6/7/16)

Alvin Shih Chen and Fiona Chen of Metro Worldwide, Inc.

Alvin Shih Chen and Fiona Chen

Co-owners Alvin Shih Chen and Fiona Chen of Metro Worldwide, Inc., a trucking company, underreported payroll by $4.7 million. The owners paid their truck drivers in cash to avoid reporting them to the insurer and to reduce their payroll obligation. While the company reported nearly $3 million in payroll to California’s State Compensation Insurance Fund, the actual payroll amount was $7.6 million. An estimated $2.1 million in premiums was lost.

 

10. (Florida) Construction Company Defrauds Workers’ Compensation Insurer of $1.8 Million by Underreporting Payroll (4/6/16)

Maira Chirinos, owner of Pompano Beach-based Tocoa Builders Inc.(Broward County Jail)

Maira Chirinos, owner of Pompano Beach-based Tocoa Builders Inc.(Broward County Jail)

Maira Chirinos, the owner of construction company Tocoa Builders, Inc. misrepresented information regarding the company’s operations, employees, and payroll when applying for a workers’ compensation policy. The misrepresentations enabled Chirinos to avoid paying at least $1.8 million in workers’ compensation premium payments. An investigation found Chrinos grossly underreported payroll to the insurance company. She reported a payroll of $76,000, but more than $11 million in payroll checks were cashed during the period covered by the policy.

 

 

 

For more information, contact:
Leonard T. Jernigan, Jr.
Adjunct Professor of Workers’ Compensation Law
N.C. Central University School of Law

The Jernigan Law Firm
3015 Glenwood Avenue, Suite 300
Raleigh, North Carolina 27612
(919) 833-0299
jes@jernlaw.com
www.jernlaw.com
Twitter: @jernlaw
Blog: www.ncworkcompjournal.com

What Could You Possibly Know About Your Own Disability?

Today’s post comes from guest author Roger Moore, from Rehm, Bennett & Moore.

In 1991, the Social Security Administration drafted a rule that explained that controlling weight was given to medical opinions from treating sources about the nature and severity of claimants’ impairments if they are well-supported by medically acceptable clinical and laboratory diagnostic techniques and are not inconsistent with other substantial evidence in the record. This rule is commonly known as the “treating physician rule.”

The SSA has recently proposed a number of changes to this rule based upon a 2013 study (downloadable PDF). Among the recommendations were to no longer apply controlling weight to doctor opinions addressing the following issues:

  • Statements that an individual is or is not disabled, blind, able to work, or able to perform regular or continuing work;
  • Statements about whether or not an individual’s impairment(s) meets the duration requirement for disability;
  • Statements about whether or not an individual’s impairment(s) meets or equals any listing in the Listing of Impairments;
  • Statements about whether or not an individual’s impairment(s) functionally equals the Listings.

The SSA will also not use a diagnosis, medical opinion, or an individual’s statement of symptoms to establish the existence of impairment. A physical or mental impairment would now need to be established by “objective medical evidence.”

It’s easy to understand how discounting a treating source could adversely affect applicants for disability. These physicians have the most interaction with their patients in terms of frequency and duration of involvement. When you contrast a treating physician’s opinion with a doctor chosen by the SSA who most often never even meets or speaks with the claimant, you can see the problem. Putting these two entities on the same footing legally seems misguided at best and purposefully devious at worst. 

However, when you add in that the SSA will not use an individual’s statement of symptoms as a basis for finding disability, particularly in the mental-health field, you make proving disability a much more difficult proposition than it already is. Individuals who are applying for disability typically face difficulty seeing doctors on a regular basis due to obvious financial considerations.  They often cannot afford the “objective” tests to fully explore the extent of their diagnoses. Moreover, there are no objective tests to diagnose depression, schizophrenia, anxiety, etc. The very nature of these claims requires a thorough examination of the claimant’s expression of disability to diagnose, evaluate and treat. The SSA cannot possibly ignore the claimant’s accounts of their disability and do an adequate job of evaluating these claims, especially the ones based upon mental illness. 

The SSA needs to jettison these proposed rule changes, and stick with the controlling weight standard that has been in place for 25 years. Furthermore, they need to allow the judges to evaluate claimant testimony without rigid rules that discount their personal evidence.

To comment on the SSA proposal, follow this link: Regulations.gov – Docket Folder Summary and press the “Comment Now!” button. Comments are due Nov. 8 (next Tuesday, aka Election Day).  

Please contact an experienced Social Security Disability lawyer with specific questions about the details of your case.

Federal “Takeover” of Work Comp?

Today’s post comes from guest author Charlie Domer, from The Domer Law Firm.

State workers’ compensation laws are facing increased scrutiny from the federal government.  As reported by NPR, the U.S. Labor Department is exploring the idea of further oversight of state-run workers’ compensation systems.  The full Labor Department report can be found here.

Traditionally, beginning with Wisconsin in 1911, individual states enacted, amended, and ran their own workers’ compensation system.  These systems certainly shared the similar overall framework of the “grand bargain” of work comp: an inability to sue an employer in exchange for defined benefits without proviing fault.  Within this framework, though, the state-led process allowed each state to tailor its approach in line with the industries of their state and particular legislative goals.

However, in the past decade or so, state legislative enactments around the country have significantly reduced (and in some cases, slashed) worker’s compensation benefits for injured workers.  A deep dive on the effect of these efforts was revealed in a series of stories by ProPublica and NPR.  The new Labor Department report echoes the refrain of these stories–indicating:

Despite the sizable cost of workers’ compensation, only a small portion of the costs of occupational injury and illness is borne by the employer. 

Costs are inappropriately shifted to the worker, their families, and the government (through other benefit programs).

Furthermore, with lowering costs on employers for workplace injuries, those employers–especially “high hazard employers”–have less incentives for safety or preventing injuries in the first place.  

As such, the Labor Department suggested the need to explore federal oversight or minimum federal standards for state workers’ compensation laws.  It even suggests the potential to reconvene a national commission–last seen in the 1970s–to study state workers’ compensation systems.  Any of these proposals would be major sea changes to the traditional state-led approach.

Whether any of these proposals will move forward is unknown, but one fact remains: based on legislative attempts to reduce injured workers’ benefits, the state-led workers’ compensation systems face increased scrutiny.   Pushed too far against workers, these laws face constitutional challenges–and ultimately the threat of federal oversight or takeover.

 

 

Young Workers More Likely to Get Hurt

Today’s post comes from guest author Charlie Domer, from The Domer Law Firm.

 

If you are a younger worker, you are more likely to get hurt on the job.  That is the conclusion in a recent interesting article in Occupational Health & Safety: Protecting our Future: Young Worker Safety on the Job.

The article offers theories on why younger workers are hurt more often, as well as suggestions on what employers can do to protect their workers.   In many instances, younger workers are performing more physical jobs, lack experience or proper training, and may be less likely to speak up or ask questions about what is being required.  The article offers some great suggestions for employers, including:

Remember that young workers are not just ‘little adults.’ You must be mindful of the unique aspects of communicating with young workers.”

This is a helpful reminder for all of us in positions of authority or supervision.

It should be noted that younger workers (under age 27 in Wisconsin) carry a “presumption” of maximum earnings for permanency benefits.  Wisconsin law recognizes that a worker’s earning capacity before age 27 may not be an adequate representation of their actual earning power/capacity.  Injured workers–under age 27–are wise (beyond their years) to consult with an experienced attorney. 

Rule Requiring Disclosure of Labor Law Violations by Federal Contractors Temporarily Blocked by Federal Courts

President Barack Obama signs the “Fair Pay and Safe Workplace” executive order

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

A federal judge in Texas recently issued a temporary injunction against the Fair Pay and Safe Workplaces Executive Order. The order would have required contractors applying for federal contracts to disclose any violations of most federal and state labor and employment laws within the last three years in order to receive a federal contract over $500,000.

In an opinion criticized by employees’ groups and hailed by employers’ groups, U.S. District Judge Marcia Crone criticized that the Fair Pay and Safe Workplaces Executive Order overstepped executive authority on a number of grounds, including the fact that the forced disclosure violated the First Amendment rights of government contractors. The order amounted to defamation of certain contractors, which violated their Fifth Amendment liberty interests, and the order’s restriction on the use of arbitration agreement in employment contracts of federal contractors violated the Federal Arbitration Act.

Crone also wrote that the executive order violated congressional intent in how labor laws were enforced, because it forced contractors to settle labor and employment law issues in order to remain eligible for government contracts.

But in my mind, abstract concerns about the rights of contractors pale once actual people are considered. I represented a gentleman who was fired from a federal contractor after he complained about not being paid properly. In fact, he was chased off the premises by the owner of the company with a stun gun, and the Nebraska Equal Opportunity Commission found in a public hearing, after hearing evidence from both sides, that the company, Midwest Demolition, had retaliated against my client. Earlier this year, Midwest Demolition paid a settlement through a consent decree to the U.S. Department of Labor for not paying their employees overtime. To me, the Fair Pay and Safe Workplaces Executive Order is perfectly suited to deal with egregious employer misconduct.

Judge Crone did not order an injunction against enforcement of the paycheck transparency parts of the executive order, which would require federal contractors to inform workers if they were independent contractors and to fully and clearly explain deductions.

The Fair Pay and Safe Workplaces Executive Order is the latest example of the use of executive-branch rule-making to expand employee protections. Earlier this year, the Supreme Court upheld a Department of Labor regulation expanding wage and hour protections to home health aides after it withstood a court challenge from employers. The Occupational Safety and Health Administration’s attempt to limit post-work injury drug testing is currently being challenged in federal courts. Executive rule-making is a consequence of partisan gridlock when Democrats control the presidency and Republicans control Congress. Pundits and political forecasters are anticipating more political gridlock after the election, so executive rules that withstand court challenges could be how employee rights expand for the foreseeable future. 

Department of Labor Weighs In on New Age of Salary Servitude for ‘Executives’

Today’s post comes from guest author Roger Moore, from Rehm, Bennett & Moore.

Most of the U.S. workforce has the right, provided by the Fair Labor Standards Act, to be paid overtime for working more than 40 hours in a week. Before the federal government set rules for overtime, most employees worked longer hours, and millions of Americans worked six or seven days a week, as Chinese factory workers do today. Salaried workers also have the right to be paid a premium for overtime work, unless they fall into an exempt category as a professional, an administrator, or an executive. Exempt employees must be skilled and exercise independent judgment, or be a boss with employees to supervise. However, many companies have worked to get around these overtime rules by classifying employees like cooks, convenience store employees or restaurant workers as “managers,” “supervisors,” or “assistant managers or supervisors,” so that their employer can deny them overtime under this exception. 

In May 2016, the Department of Labor issued its final rule establishing a new minimum salary threshold for the white-collar exemptions (executive, administrative and professional) under the Fair Labor Standards Act. This new threshold of $913 per week ($47,476 annualized) more than doubles the current minimum weekly salary threshold of $455 per week ($23,660 annualized).  While that may seem like a huge increase, the old threshold level is only $2 a week above the poverty level for a family of four. Twenty-one states have filed suit to challenge this rule, citing the rule will force many businesses, including state and local governments, to unfairly and substantially increase their employment costs. 

The old rule allowed companies to put employees on “salary” at a low rate and require them to work sometimes significant overtime. The fact that so many government entities are concerned about this new rule substantially increasing their employment costs underscores the extent to which even government entities have taken advantage of employees in this fashion. Can you imagine earning $25,000/year and having to work 50, 60 or 70 hours a week? Even at 50 hours a week, that equates to an hourly wage of only $8.01!

In the first year, the department estimates that the new rule may affect, in some manner, over 10 million workers who earn between $455/week and the new $913/week threshold.  

The median worker has seen a wage increase of just 5 percent between 1979 and 2012, despite overall productivity growth of 74.5 percent (Mishel and Shierholz, 2013), according to the Economic Policy Institute. One reason Americans’ paychecks are not keeping pace with their productivity is that millions of middle-class and even lower-middle-class workers are working overtime and not getting paid for it. Before this rule change, the federal wage and hour law was out of date. This change purports to correct this modern day servitude that the law – for the last 30 years – has carved out a huge exception, allowing workers to be taken advantage of simply by assigning them a title and paying them a salary.  

 

Sources:

Labor Report Urges Study Of A Federal Role In State Workers’ Comp Laws

Howard Berkes and Michael Grabell have been investigating the decline of workers compensation for Pro Publica and NPR.

Today’s post comes from guest author Edgar Romano, from Pasternack Tilker Ziegler Walsh Stanton & Romano.

Howard Berkes and Michael Grabell have been shining a light on the deterioration of state workers’ compensation benefits over the last decade. A new U.S. Department of Labor report bolsters their investigative journalism, noting that those hurt on the job are at “great risk of falling into poverty” because state workers’ compensation systems are failing to provide them with adequate benefits.

The Workers Injury Litigation Group (WILG) has been fighting against this decline for 20 years, and we will continue to advocate for fair benefits for injured workers. The following is a summary of Mr. Berkes and Grabell’s recent article:

A “race to the bottom” in state workers’ compensation laws has the Labor Department calling for “exploration” of federal oversight and federal minimum benefits.

“Working people are at great risk of falling into poverty,” the agency says in a new report on changes in state workers’ comp laws. Those changes have resulted in “the failure of state workers’ compensation systems to provide [injured workers] with adequate benefits.”

In the last decade, the report notes, states across the country have enacted new laws, policies and procedures “which have limited benefits, reduced the likelihood of successful application for workers’ compensation benefits, and/or discouraged injured workers from applying for benefits.”

The 44-page report was prompted by a letter last fall from 10 prominent Democratic lawmakers, who urged Labor Department action to protect injured workers in the wake of a ProPublica/NPR series on changes in workers’ comp laws in 33 states.

The ProPublica/NPR stories featured injured workers who lost their homes, were denied surgeries or were even denied prosthetic devices recommended by their doctors.

A “race to the bottom” in state workers’ compensation laws has the Labor Department calling for “exploration” of federal oversight and federal minimum benefits.

“Working people are at great risk of falling into poverty,” the agency says in a new report on changes in state workers’ comp laws. Those changes have resulted in “the failure of state workers’ compensation systems to provide [injured workers] with adequate benefits.”

In the last decade, the report notes, states across the country have enacted new laws, policies and procedures “which have limited benefits, reduced the likelihood of successful application for workers’ compensation benefits, and/or discouraged injured workers from applying for benefits.”

The 44-page report was prompted by a letter last fall from 10 prominent Democratic lawmakers, who urged Labor Department action to protect injured workers in the wake of a ProPublica/NPR series on changes in workers’ comp laws in 33 states.

The ProPublica/NPR stories featured injured workers who lost their homes, were denied surgeries or were even denied prosthetic devices recommended by their doctors.

“The current situation warrants a significant change in approach in order to address the inadequacies of the system,” the report says.

That’s where federal intervention comes in. The Labor Department calls for “exploration” of “the establishment of standards that would trigger increased federal oversight if workers’ compensation programs fail to meet those standards.”

The agency also suggests a fresh look at reestablishing a 1972 Nixon administration commission that recommended minimum benefits and urged Congress to act if states failed to comply.

“In this critical area of the social safety net, the federal government has basically abdicated any responsibility,” says Labor Secretary Thomas Perez.

Without minimum federal standards for workers’ comp benefits, Perez adds, the current system “is really putting workers who are hurt on the job on a pathway to poverty.”

Prior to the report’s release, employers, insurance companies and others involved in workers’ comp programs expressed alarm at the possibility of federal intervention.

“There has never been federal ‘oversight of state workers’ compensation programs’,” says a statement posted on the website of a group called Strategic Services on Unemployment and Workers’ Compensation, which says it represents the workers’ comp interests of the business community.

“Federal requirements imposed on a national basis would be inconsistent with the state workers’ compensation system, which has been in place for more than 100 years without federal oversight,” the group wrote.

Federal minimum benefits could ensure that injured workers across the country would not receive lesser benefits for often shorter periods of time simply because they lived in a state where lawmakers dramatically cut workers’ comp costs for employers.

“This is a system with no federal minimum standards and absolutely no federal oversight,” says Deborah Berkowitz, a senior fellow at the National Employment Law Project. “Clearly, more federal oversight is necessary to assure that that this system works for those most in need of assistance.”

No direct administrative or legislative action is proposed in the report, but Sen. Sherrod Brown, D-Ohio, says he’s “drafting legislation to address many of the troubling findings laid out in this report and will be working with my colleagues to advance it in the next Congress.” 

Brown echoes Perez, saying injuries on the job shouldn’t force workers into poverty.

“But without a basic standard for workers compensation programs, that’s exactly what’s happening in too many states across the country,” Brown adds. 

Another incentive for federal involvement, the report notes, is a shift of billions of dollars in workplace injury costs to taxpayers when state workers’ comp benefits fall short and workers are forced to turn to Medicare and Social Security for treatment and lost wages.

The report lays the groundwork for federal intervention by providing an extensive section detailing the government’s role in promoting national benefits standards in both Republican and Democratic administrations dating back to 1939.

But many in the workers’ comp world consider workplace injury policy and regulation a states’ right and any prospect of a controlling federal role will likely face stiff resistance.

What Happens If an Employee Gets Hurt at the Work Holiday Party?

“Frosting and beer can be a very fun but lethal combination starting at around midnight,” says Miller, star of the upcoming ensemble comedy “Office Christmas Party” (in theaters Dec. 9). As you know, it’s holiday party season and there’s a new comedy film coming out with some great comedians (Jason Bateman, Kate McKinnon, Jennifer Aniston, Vanessa Bayer) depicting the most out-of-control work holiday party ever. Based on the preview, the employees of a large corporation really, really let loose for an insanely crazy and highly dangerous holiday party. Which leads to the legal question, what happens if an employee is injured at a work holiday party? Like most (if not all) attorney responses, the answer is “well . . . it depends.”

The answer is based on a factors laid out in a North Carolina Supreme Court case from 2007, Frost v. Salter Path Fire & Rescue, and reiterated more recently in the Court of Appeals case Holliday v. Tropical Fruit & Nut Co. In both of these cases, the employee was injured at an employment-related event out of the office. However, in one case (Frost) the worker was denied benefits whereas in the other (Holliday) the injured worker prevailed. In rendering their decisions, the court reviews six factors: 

  1. Did the employer sponsor the event?
  2. To what extent was the attendance really voluntary?
  3. Was there some degree of encouragement to attend by factors such as: taking attendance, paying for time, requiring employee to work if s/he did not attend, and/or maintain known custom of attending.
  4. Did the employer finance the occasion to a substantial extent?
  5. Did the employees regard it as an employment benefit?
  6. Did the employer benefit from the event, not merely in a vague way through better morale and good will, but through tangible advantages such as having an opportunity to make speeches and awards?

Thus, the more the employer is involved in paying for the event and requiring employees to attend, the more likely that a “party-related injury” will also be deemed a work-related injury. So with that in mind, everyone enjoy your holiday parties and go see “Office Christmas Party” for examples of what not to do. Please stay safe and have a happy holiday.